A few years back, when I lucked into a guest appearance on “The Hour: With George Stroumboulopoulos” in order to talk about a crucial vote in the last minority parliament, I compared it to a kidney stone that needed to be passed. If I had to make a similar assessment of the current parliament, I’d turn to the other side, so to speak, of the body politic. Despite being in control of one the longest-running minority parliaments in Canadian history, Stephen Harper’s three-year old government hasn’t produced much of consequence. There’s been no groundbreaking legislation, no decisive displays of political leadership nor even any particularly interesting or spirited debates. Instead, there’s just been a lot of red-faced straining, on both sides of the aisle.
But if there’s one catalyst that might get things moving again in our constipated political system, it’s the issue of corporate tax cuts. The Conservative government’s desire to push corporate tax rates ever lower seems to have provided the push that Liberal leader Michael Ignatieff needed in order to finally find his missing spinal column. After backing down from every previous Conservative policy provocation, Ignatieff looks like he might actually be ready to push back on this one. “If we’re going to have a big argument here about how to create jobs, how to create a future for the Canadian economy, this is a debate that we welcome,” he told a scrum of Parliament Hill reporters last week. “You can cut corporate taxes when you’re in a surplus. Cutting it in a deficit adds to Canada’s financial woes and we think the way to create jobs is invest in post-secondary education and help small and medium enterprises to become more competitive and take on more workers.”
If the response to an article posted on the Globe and Mail’s website last weekend is any indication, Ignatieff may have picked a winning issue over which to fight the next election. In a piece published by the paper’s “economy lab,” Canadian Centre for Policy Alternatives economist Armine Yalnizyan outlines the case against corporate tax cuts. Contrary to what the government and many leading economists argue, Yalnizyan argues that corporate tax cuts do not contribute significantly to job creation, has little impact on the level of capital investment by Canadian corporations and costs the federal treasury billions of dollars that could be better spent in other areas like public infrastructure. Readers, it seems, agreed overwhelmingly.
There’s obviously an element of self-selection at play here, and efforts to parse the content of online comment threads in the search for a broader trend or pattern is a fool’s errand. Still, the reaction speaks to the fact that Canadians may be waking up to the fact that a tax policy built around shoveling as much money as possible into the gaping maw of our corporation citizens may not be in everyone’s best interests. As Yalnizyan writes, “an across-the-board general corporate income tax rate cut rewards companies whether they create jobs or kill them. The primary sector of the Canadian economy is increasingly in the hands of off-shore investors, who take the profits and jobs elsewhere. That’s global capitalism, but we don’t need to reward it.”
In fact, we’ve rewarded it quite a bit already. Canada has one of the lowest corporate tax rates in the developed world. The idea that lowering it further still will serve to encourage more investment and economic activity, meanwhile, is complicated by the fact that there are plenty of other countries with rock-bottom corporate tax rates who haven’t exactly enjoyed an economic renaissance as a result. At just 10 per cent the corporate tax rates in Bulgaria and Cyprus are the lowest in Europe, and their economies are anything but admirable. Ireland might be an even better example, because while its low rate of corporate taxes (currently at 12.5 per cent) was credited with creating the so-called “Celtic Tiger” in the early part of the century, that tiger proved to be a sad and sick little kitty.
What’s even more galling about the idea of further corporate tax cuts is that it comes at a time when governments around the world – Canada included – ought to be protecting every available revenue stream. We managed to avert – for now, at least – a total breakdown of the global economy by injecting massive quantities of fiscal stimulus into it, but those billions of dollars in debt will have to be repaid, and soon. Unless scientists discover that the entire landmass of the Northwest Territories is made up of rare earth minerals, in Canada, like other western democracies, that will have to come from taxes. What’s gone down, in other words, will almost certainly have to come back up.
Politicians have never been particularly good at playing the long game, but cutting corporate taxes – taxes that are already at record-low levels, remember – in the face of an imminent deleveraging of the national balance sheet is nearly as stupid and self-destructive as somebody who’s lost in the desert using their last litre of drinking water to wash their face. And, as Yalnizyan points out, it virtually guarantees that the investments that need to be made in this country’s physical and social infrastructure won’t happen. “It is a false economy to stick the next generation with an unnecessarily high price tag for what should be happening now – rebuilding the foundation for business, family and community needs everywhere, while the cost of borrowing is at historic lows and unemployment is still high.” Once again, we’re sacrificing tomorrow’s prosperity to pay for today’s comforts.
Whether Michael Ignatieff can use this issue to win the next election will be determined in due course. That the logic behind his side of the argument should appeal most strongly to young people, those whose long-term prospects are being mortgaged to service today’s luxuries, doesn’t exactly help. After all, young people aren’t known for rushing out to the ballot boxes, and tax policy isn’t the most approachable issue. But if he’s going to make a stand, he couldn’t pick a better issue. Here, at least, he’ll be holding the high ground.
